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Personal Finance

8 insurance products you may not need

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Nowadays, it seems like every other TV commercial is about some other insurance product. While consumer choice can be a good thing, not all reassurance is as essential as the ads suggest. “There is a lot of fear-based sales and marketing that specifically target retirees,” says Jonathan Howard, a certified financial planner with SeaCure Advisors in Lexington, Ky., As well as a former insurance salesman. “People end up buying because they are terrified of a loss rather than to cover an actual need for insurance. “

While Howard believes insurance plays an important role in anyone’s financial plan, there are some products that are more geared towards protecting the insurance company’s bottom line than yours. Insurance decisions should not be made in a vacuum. They should consider your entire financial situation. This way, you can identify gaps and determine the coverage you really need, as well as what you might be without. Above all, never buy insurance in a rush out of fear, especially if it relates to the products on this list.

If you’re still working but nearing retirement, consider whether your long-term disability insurance is worth keeping. The premium for a group employer-sponsored plan usually increases with age, says Greg Klingler, director of wealth management at the Government Employees’ Benefit Association in Fort Meade, Maryland.

The policy will also limit the payment period up to a particular age, such as 65. As this age approaches, your maximum possible benefit decreases. This is especially true for someone who could have retired earlier but is still working. “You’re no longer dependent on your salary, so weigh the value of protecting that extra income against the high cost of insurance,” says Klingler.

When you buy goods like computers, televisions, smartphones and home appliances, there is a good chance that the seller is trying to sell you additional warranty to replace or repair the item after you buy it. Consider if you have enough savings to replace the product yourself.

By design, insurance must collect more premiums than it pays, making it a net negative for the average insured. Most of the insured do not receive anything.

For major assets like a home or vehicle, most people would find it difficult, if not impossible, to replace them out of pocket, so it makes sense to insure these assets with a home or auto policy. But for the little things you could easily replace yourself, like a $ 700 laptop, ignore the warranty and self-insure instead.

Stroke, heart attack, life-threatening cancer, and organ transplants are just a few of the serious health issues covered by critical illness insurance. If you develop any of these conditions, the insurer sends you a lump sum cash payment, varying between $ 10,000 and $ 50,000, which can be spent as you wish.

Despite this flexibility, Howard is not crazy about this type of insurance, “where unless a specific situation arises, you don’t get anything back”. He suggests review your potential health insurance payouts to see if you need critical illness insurance or if you can manage bills with savings.

All the dysfunctions and uncertainties in Washington have led to a new product: social security insurance. It’s a kind of annuity, an insurance contract that turns part of your savings into future income. When you add this insurance to an annuity, the insurer promises that your annuity payment will increase to cover any government deficit that results in a smaller Social Security benefit.

Howard doesn’t think it’s a good return on your investment. “Retirees vote and mostly live in swing states,” he says. “If the government ever cut social security for people who already claim it, they would never hear the end of it. “

Perhaps benefits will be reduced for future generations, but Howard doesn’t expect those who are already receiving benefits to have a problem.

Travis Price, a Medicare insurance agent in Traverse City, Michigan, doesn’t think individual dental and vision policies are worth buying in retirement. “When people work and benefit from a dental / vision group, insurance coverage is heavily subsidized within the group and by their employer. When entering the individual market, coverage costs can be multiplied by 10 for less coverage.

Not only are the premiums higher for individual plans, they could also result in high out-of-pocket costs for care, exclusion from major services for the first year of coverage, and a limited annual coverage limit. Price says an entry-level plan to cover both dental and vision care can be capped at $ 1,500 per year. “Often it’s best for older people to just be a cash patient and negotiate cash costs with their provider,” Price explains. Another alternative, he says, is to find a Medicare Advantage plan that includes dental and vision coverage.

No one disputes that long-term care in the United States is an expensive risk. A private room in a nursing home costs on average more than $ 90,000 per year, according to the US Department of Health and Human Services.

Still, Howard and Klingler dislike traditional long-term care insurance policies because of their high premiums. “The cost varies depending on the carrier, the amount of coverage and the applicant’s medical condition, but I have seen [premiums] about $ 5,000 a year for a couple in their sixties, $ 10,000 a year when they’re 70, ”says Howard. He also notes that premiums increase over time with age, even after you sign up.

Howard says traditional long-term care insurance is another example of insurance that only applies in such narrow and specific circumstances that it’s not worth it, especially given its high cost. . As an alternative, he prefers a LTC hybrid life insurance policy because that way if someone doesn’t need long term care, the heirs get the death benefit instead.

Klingler suggests considering other resources before purchasing a long term care policy. “In almost all cases, you don’t need to cover the full cost [of care]He said, because some expenses, such as food, shelter and utilities, would be covered by the long-term care facility.

Even when one spouse enters a long-term care facility while the other stays in the couple’s home, some daily living costs are further reduced. If you are considering long term care insurance, consider whether you should cover the full cost of a nursing home or whether you can opt for a more affordable partial benefit.

It happens in a flash. You are at the car rental counter at the start of a trip, when the agent asks if you want insurance. Well, why not get it? It’s only $ 12 to $ 15 more per day. The point is, you may already have rental car insurance through your credit cards, auto policy, and membership in an organization like AAA.

Your credit card may also provide other types of travel insurance, such as coverage for lost baggage, trip cancellation, emergency evacuation, and emergency medical and dental insurance during the trip. Your health insurance can also cover you in the event of a medical emergency. Before purchasing travel insurance, study what you already have through your existing benefits.

While the classic example is rental car insurance, there is often a lot of overlap with the insurance people have. Your auto insurance covers medical costs after a car accident, but so could your health insurance. Your home insurance covers liability for injury to your property, just like an umbrella policy, which should provide enough additional coverage, if needed, to protect your equity.

But don’t go overboard in purchasing insurance. Due to this overlap, your existing policy limits may be higher than necessary because they cover the same risk. It is also possible that the coverage provided by just one of these policies is more than what you actually need. Howard recently discovered that his homeowner’s coverage was $ 100,000 more than the cost of replacing his home.

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